The U.S. Consumer Price Index (CPI) rose sharply more than expected, rising 3.4%. These developments, which exceed the predictions of many economists, indicate continued inflationary pressures on the U.S. economy. As a result of this news, Bitcoin price has broken the consolidation near $46,000 and is heading toward $48,000.
US CPI inflation rises to 3.4%
The U.S. Bureau of Labor Statistics (BLS) reported Thursday that U.S. inflation, as measured by the Consumer Price Index (CPI), rose to an annualized 3.4% in December. This followed a 3.1% rise in November and beat market expectations of 3.2%. Monthly CPI also rose 0.3%, beating analysts’ expectations for a 0.2% rise.
The core consumer price index (CPI), which omits volatile food and energy prices, rose 0.3% monthly, meeting expectations. Core CPI rose 3.9% last year, down slightly from 4% in November. The Bureau of Labor Statistics (BLS) highlighted in a press release that the shelter index continued its upward trend in December, accounting for more than half of the overall monthly increase for all categories.
Energy prices rose 0.4%, driven by higher electricity and gasoline indices, which more than offset the decline in the natural gas index. The food index in December rose 0.2%, consistent with the previous month’s increase. Among these, the food eaten at home index rose slightly by 0.1%, while the food eaten outside the home index recorded a slightly higher increase of 0.3%.
The US dollar strengthened against currencies following the release of inflation data. As of the latest update, the US Dollar Index was up 0.05% on the day to 102.6.
Bitcoin price targets $48,000.
While the SEC’s approval of a spot ETF did not provide the expected boost to Bitcoin’s price reaching $48,000, rising inflation rates are now increasing demand for Bitcoin. This happens as various ETFs continue to trade on exchanges. Bitcoin price rose significantly from a low of $46,800 to a high near $48,000.
Investors often turn to cryptocurrencies as a hedge against rising inflation. While traditional assets tend to fall in value when inflation is high, assets like Bitcoin tend to be deflationary due to limited supply, causing a surge in purchase demand.
Inflation, which had declined in the fall, rose slightly in December. The increase highlights that it may be premature to declare an end to concerns over the biggest spike in consumer prices in 40 years.
The main driver of this rise has been the cost of basic living, including rising rents and higher food and gasoline prices. In addition, used car prices also showed an unexpected rise.